The Corporate Travel Management Ltd (ASX: CTD) share price is flying today as investors react to the company’s full-year FY20 results.
Today’s share price rise will be a welcome reprieve for shareholders who saw Corporate Travel shares shrink to just $4.70 at the bottom of the March bear market. Shares have been on the road to recovery since and are currently sitting nearly 10% higher for the day at $13.30.
What did Corporate Travel report?
For the full year, Corporate Travel delivered $349.9 million revenue from total transaction volume (TTV) of $4.56 billion. These results represent declines of 22% and 29%, respectively, over the prior corresponding period (pcp) of FY19.
Underlying EBITDA came in at $65 million, down 57% on the pcp, while underlying NPAT fell by 67% to $32 million. However, on a statutory basis, NPAT swung to a loss of $8.2 million after factoring in the full impact of the cost of redundancies, impairment, increased charges for depreciation and amortisation, and the recognition of bad and doubtful debts.
Unsurprisingly, Corporate Travel said that FY20 provided the most difficult operating conditions ever faced by the company. The first-half performance was impacted by Brexit, Hong Kong demonstrations and the US-China trade war, while COVID-19 significantly disrupted the business from March.
Cash burn ranged from $5 million to $10 million per month during April to June, below the anticipated ranges advised to the market in May 2020. The company ended the financial year with a $92.8 million cash balance and no drawn debt. Unlike its ASX travel peers Webjet Limited (ASX: WEB) and Flight Centre Travel Group Ltd (ASX: FLT), Corporate Travel has so far managed to avoid a capital raising.
Strong finish to FY20
On the whole, Corporate Travel delivered better than expected results in the fourth quarter of FY20. In its May trading update, the company expected to record an EBITDA loss in the range of $5-10 million per month, and revenue of $2-5 million per month. In reality, Corporate Travel averaged an EBITDA loss of $3 million per month during April to June, while average revenue came in at $11.5 million.
However, this $11.5 million result includes government grants, which averaged $2.5 million per month. Global government grants contributed $7.7 million revenue to the overall FY20 result, while the company reported $44.9 million of costs related to COVID-19.
Regional performance
TTV in the North America region fell 21% in FY20 to $1.15 billion, while revenue came in 24% lower at $113.6 million. This result was heavily weighted to domestic travel.
North America was the company’s largest contributor to revenue in 2H20, which Corporate Travel said was a testament to the success of continuing client wins. Notably, North America was the only region that didn’t receive government support.
In Europe, Corporate Travel achieved $74.8 million in revenue from TTV of $933.2 million. This represents declines of 22% and 18%, respectively, over the pcp. The company said that its Europe region continues to materially outperform the market due to essential travel clients and winning business. Again, due to travel restrictions, this result was heavily weighted to domestic travel.
Turning to the local market of Australia and New Zealand (ANZ), Corporate Travel experienced a 28% drop in TTV to $958.8 million, while revenue fell 36% to $78 million. The company said it continues to win market share and outperform the market.
The Asia region suffered the steepest falls, with TTV tumbling 40% to $1.5 billion and revenue dropping 38% to $50 million. Unlike Corporate Travel’s other regions, Asia is predominantly reliant on international travel as it has a lower volume of essential travel clients. The company noted that transactions were running at just 2-5% of prior year volumes.
Corporate Travel cancels dividend
Back in March, Corporate Travel decided to defer the payment of its 18 cents per share interim dividend to later in the year.
However, given the continued uncertainty around recovery timeframes across the globe, the company has cancelled this dividend. Additionally, there will be no final dividend in FY20.
Now what?
Given government decisions on border restrictions are unknown, Corporate Travel expectedly declined to provide FY21 guidance.
However, it did note that client activity has begun to recover from a low point in April, with July activity higher month-on-month compared to June. The company said this suggests a broad-based recovery in corporate activity is underway in the northern hemisphere, with corporates back at work in late August.
July, which is typically Corporate Travel’s slowest month due to summer vacations in the northern hemisphere, recorded a lower underlying EBITDA loss of $2.2 million. What’s more, the Europe and ANZ regions actually managed to break even in July.
Concluding its commentary on outlook, Corporate Travel pointed out that an extended period of no international travel is likely to create opportunities for industry consolidation. The company said it is well-positioned to pursue any relevant opportunities and will continue to consider potential acquisitions.
While there could be value in the Corporate Travel share price, there’s too much uncertainty for me to invest in the travel sector right now. I’d rather invest in companies that aren’t reliant on borders re-opening, such as the growing health technology company profiled in the free report below.
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